Spectre Brands

DeadToy supermarkets · Philadelphia, Pennsylvania

Kiddie City

Founded in Philadelphia in 1957. Liquidation announced Jun 2, 1993.

Lionel gave up making toy trains to run toy supermarkets. The trains are still made. The supermarkets are not.

Why dead: Lionel Corporation announced on June 2, 1993 that it would liquidate Lionel Leisure and close its last 28 Kiddie City and Playworld stores; we found no business trading under the name since.242526

Original illustration of a toy supermarket with a kangaroo on the roof. Not an official asset; the lettering and the animal are our own drawing.

Kiddie City, with its sister chains Lionel Playworld and Lionel Toy Warehouse, was at different times the second, third or fourth largest toy chain in the United States. Its owner filed for Chapter 11 in 1982, came back in 1985, fought off a takeover bid in 1989 and filed again in 1991. Two years later the creditors voted to liquidate. This brand predates EDGAR and the web, so the page is built from two federal appeals court opinions and the newspapers and wire services of the time. It has fewer numbers than our other post-mortems, and it says so where the record runs out.

The chain in four numbers

105
stores before the first bankruptcy, cut to 56 by March 19834
$426M
revenue in the year to January 31, 1991, with a $5.9M loss16
$100.3M
loss in the final fiscal year, on sales of $291.5M2627
28
stores left when creditors voted to liquidate2427

Key findings

  1. It was always the small one. In 1982 Toys “R” Us had 9.5% of a $9 billion toy market and Lionel about 3%.1 In 1988 Toys “R” Us had 358 stores and Lionel 90.10
  2. It grew by buying, at the wrong time. Lionel paid $12.25M (derived) for 26 stores in Texas and the Midwest in 1980, just before a recession. Fifteen months after the second purchase it was in Chapter 11.12
  3. Lenders decided both bankruptcies. Banks refused further support after December 1981, and declined to renew a $65M credit line in 1991.116
  4. The offer it refused was worth more than what was left. A 1989 bid valued the shares at $8.25 each. On the day of the 1991 filing they closed at 15/16 of a dollar.1216
  5. The discounters finished it. By 1993 the trade press counted Kmart, Wal-Mart and Target, not just Toys “R” Us, as the winners.23

Post-mortem No. 007 · Every figure links to a numbered source · Derived figures, estimates and unverified claims are labeled

The story

A train maker’s toy stores, and the rival they never caught

Kiddie City did not fail once. Its owner went through Chapter 11 in 1982, recovered, and went through it again in 1991. Both times the trigger was the same: a weak Christmas, and lenders who would not wait for the next one.

Chapter 1 of 5

105

stores before the 1982 bankruptcy, as later reported by the Times

Commercial · 1978Lionel Playworld holiday commercial A Christmas spot from the years when Lionel was still adding stores. The 1978 date is the uploader’s and we could not confirm it. Watch on YouTube

1957 – 1981 · Trains out, toy stores in

Lionel keeps the stores and sells the trains

Kiddie City was founded in Philadelphia in 1957.24 It sold toys the way a supermarket sold groceries: a large self-service store with long aisles and shopping carts, at discount prices. A Rochester reporter who visited one in 1979 wrote of “aisles piled 10 feet high with toys.”28

The Lionel Corporation, the New York company famous for electric trains, sold the rights to manufacture those trains to General Mills in 1969 and concentrated on toy retailing.19 It kept a royalty of 3.5% of train sales, worth $679,534 in 1980.1 We could not find a contemporary source online for when Lionel bought Kiddie City or what it paid, so this page does not give a date or a price for that deal.

The stores traded as Lionel Kiddie City, Lionel Playworld and Lionel Toy Warehouse.16 In 1980 Lionel bought two more chains: Fun City Toys, with nine stores in Texas, for $4.5M, and the Consolidated Toy Company, with 17 stores in the Middle West, for $7.75M.1 By early 1982 it had more than 90 stores in 22 states by one Times count, and 105 by another.14

Chapter 2 of 5

$51M

lost in 1982, “some $51 million” in the Times’s words

Commercial · 1983Lionel Playworld: “Turn that frown upside down” A Playworld spot built around the chain’s jingle. The uploader says it aired before November 28, 1983 on WWL, the CBS station in New Orleans. Lionel was in Chapter 11 at the time.332 Watch on YouTube

Feb 1982 – 1985 · The first bankruptcy

A bad Christmas and $91 million owed to toy makers

On February 19, 1982 Lionel and two subsidiaries, Lionel Leisure and Consolidated Toy, filed for Chapter 11 in the Southern District of New York.2 Management blamed poor Christmas sales. Analysts blamed the acquisitions, made just before the economy turned, and a shortage of capital that left the stores without full shelves for most of the year.1 The company had repaid $85M of unsecured debt in December 1981, the banks refused to continue their support, and it owed toy manufacturers about $91M.1

Creditors forced out the two top officers in July 1982.3 Michael J. Vastola, who had joined in 1971 as a junior accountant, became chairman and chief executive in March 1983, at 37. By then the chain had shrunk from 105 stores to 56.4

The reorganization plan offered unsecured creditors $70M in cash, preferred stock and about 35% of the common shares.56 Most of the cash was to come from selling Lionel’s 82% stake in Dale Electronics for $50M. Shareholders objected, and in November 1983 the Second Circuit reversed the approval of that sale.2 Our sources do not show how the plan was finally funded. Lionel emerged from Chapter 11 in 1985.1627

You could say that the theory of buying existing stores rather than opening stores on your own like Toys R Us just didn’t work.

Stewart Robbins, analyst, Paine Webber Mitchell Hutchins, in The New York Times, Feb 25, 19821

Chapter 3 of 5

$5.8M

profit in 1987, on revenues of $343.6M

Original illustration in the spirit of the kangaroo mascot. Not the trademarked character.

1985 – 1988 · The comeback

A kangaroo on 34th Street

Out of bankruptcy, Lionel expanded again.2427 The chain’s symbol was a kangaroo, and its jingle told children to “turn that frown upside down.”1028 In 1987 Lionel earned $5.8M on revenues of $343.6M. A merger with Child World, the second largest toy chain, came close that year and fell apart when the stock market crashed.1020

At the end of August 1988 Kiddie City opened in Manhattan, in the old Franklin Simon department store on West 34th Street: 27,000 square feet on two floors, 28 checkout registers and about 14,000 different toys. The company said the store needed $10M to $15M of sales a year to make a profit. Lionel then had 90 stores in 16 states and was the fourth largest toy chain in the country. Toys “R” Us had 358.10

Asked why Kiddie City had not come to New York sooner, Vastola gave a one-word answer: “Stupidity.”10

Chapter 4 of 5

$8.25

a share, offered in cash and securities in September 1989

Original illustration. The stores gave shoppers supermarket carts, even in Manhattan.10

1989 – Jun 1991 · The takeover fight

An $8.25 offer, refused

In February 1989 Robert I. Toussie, a New York real estate developer whose partnership owned 9.9% of Lionel, said he wanted to buy the company.11 In September he offered a package he valued at $8.25 a share, about $110M for the 13.4 million shares and more than $150M including debt.12 Lionel resisted. In November Toussie said he was re-evaluating the bid in view of Lionel’s “extremely poor” operating results.13 In January 1990 Lionel paid the partnership $500,000 to settle litigation and the tender offer ended.14

The business kept weakening. In the year to January 31, 1991 Lionel lost $5.9M on revenue of $426M. To raise cash it sold the Lionel trademarks, its last tie to the trains, to Lionel Trains Inc. for $10M. Its banks, led by Manufacturers Hanover and Chemical Bank, declined to renew a $65M working-capital line.16

On June 14, 1991 Lionel filed for Chapter 11 again, with 97 stores. The shares closed at 15/16 of a dollar.1617

It was an unfinanced, conditional tender offer, meaning they just didn’t have the money.

Michael J. Vastola, on the Toussie bid, The New York Times, Jun 15, 199116

Chapter 5 of 5

28

stores in seven states when the creditors voted to liquidate

Original illustration of a going-out-of-business sale. Not a photograph of a real store.

Jun 1991 – Jun 1993 · Liquidation

From 97 stores to 28, then none

Lionel closed its western stores first, including four in Utah in October 1991.18 By June 1992 it had closed 30 of 101 stores and was down to 71.20 That month it opened merger talks with Child World, which was also in Chapter 11. The talks collapsed in August and Child World closed.2021

Christmas 1992 was poor. Lionel stopped paying suppliers and landlords in December, closed 13 stores after the holiday and announced 27 more closings in January 1993, leaving 29 stores around Philadelphia, central New Jersey, Baltimore, Washington, Cleveland and south Florida.23 For the year to January 30, 1993 it lost $100.3M on sales of $291.5M.2627

On May 25, 1993 the creditors’ committee voted to liquidate Lionel Leisure. Lionel announced it on June 2.2427 A store manager in Bel Air, Maryland said staff learned by electronic mail about two hours before the press.27 The date the last store closed is not in our sources.

Everyone was hoping we would weather the storm.

Tim Gnap, manager of the Bel Air, Md. Kiddie City, The Baltimore Sun, Jun 6, 199327

Timeline

Thirty-six years, 34 moments

From a Philadelphia toy supermarket to a creditors’ vote. Filter by thread.

All 34 events as a list
  1. 1957
    Stores

    Kiddie City is founded

    The chain starts in Philadelphia.24

  2. 1969
    Corporate

    Lionel sells the trains

    Lionel Corporation sells the rights to make Lionel trains to General Mills and concentrates on toy retailing. It keeps a 3.5% royalty.19

  3. 1970
    Stores

    Whitehall, Pa. store opens

    The Kiddie City on MacArthur Road in the Lehigh Valley opens. It will still be trading in June 1993.26

  4. 1971
    Corporate

    Vastola joins

    Michael J. Vastola joins Lionel as a junior accountant.4

  5. Late1979
    Stores

    Rochester stores open

    Two Kiddie City stores open in the Rochester, N.Y. area, among the first toy supermarkets there.28

  6. 1980
    Money

    Fun City Toys bought

    Lionel pays $4.5M for a nine-store Texas chain.1

  7. Nov1980
    Money

    Consolidated Toy bought

    Lionel pays $7.75M for 17 toy stores in the Middle West.1

  8. Dec1981
    Money

    $85M repaid, banks pull back

    Lionel repays $85M of unsecured debt. The banks refuse to continue their support.1

  9. Feb 191982
    Bankruptcy & end

    First Chapter 11

    Lionel, Lionel Leisure and Consolidated Toy file in the Southern District of New York. Toy makers are owed about $91M.12

  10. Jul1982
    Corporate

    Top two officers replaced

    Ronald Saypol and Richard R. Schilling Jr. resign under pressure from creditors.3

  11. Mar1983
    Corporate

    Vastola becomes chairman and CEO

    The chain has shrunk from 105 stores to 56. Lionel lost “some $51 million” in 1982.4

  12. Mar1983
    Money

    Deal with creditors

    The creditors’ committee agrees to $70M in cash, $10M of preferred stock and about 35% of the common shares.5

  13. Jun1983
    Money

    Plan filed

    The reorganization plan is filed with the bankruptcy court.26

  14. Sep 71983
    Money

    Dale sale approved

    The bankruptcy court approves selling Lionel’s 82% of Dale Electronics to Peabody International for $50M.27

  15. Nov 291983
    Money

    Second Circuit reverses

    The court of appeals reverses approval of the Dale sale, in an opinion still cited in bankruptcy law.235

  16. 1985
    Corporate

    Out of Chapter 11

    Lionel emerges from bankruptcy and begins expanding again.162427

  17. Apr1986
    Corporate

    Kughn buys the train business

    Richard P. Kughn, a Detroit developer and collector, buys the Lionel train division from Kenner Parker Toys.9

  18. 1987
    Rivals

    Child World merger falls through

    Lionel and Child World almost merge. The deal falls apart when the stock market crashes.20

  19. Aug1988
    Stores

    Kiddie City opens in Manhattan

    A 27,000 square foot store opens on West 34th Street. The chain has 90 stores in 16 states.10

  20. Feb 131989
    Money

    Toussie wants the company

    Robert I. Toussie L.P., owner of 9.9%, tells the SEC it wants to acquire Lionel. The shares jump $1 to $6.75.11

  21. Sep 111989
    Money

    The $8.25 offer

    Toussie offers cash and securities valued at $8.25 a share, about $110M.12

  22. Nov1989
    Money

    Bid under review

    Toussie says it is re-evaluating its offer because of “extremely poor” operating results.13

  23. Jan1990
    Money

    Tender offer ends

    Lionel pays Toussie $500,000 to settle litigation and the hostile offer is dropped.14

  24. Apr1990
    Money

    Shareholders ask questions

    Trendex Capital Management asks the board to examine the sale of a block of stock to investors tied to management.15

  25. 1990
    Money

    Lionel trademarks sold

    Lionel sells the trademarks and other rights to Lionel Trains Inc. for $10M to raise cash.16

  26. Jun 141991
    Bankruptcy & end

    Second Chapter 11

    Lionel files again with 97 stores, after its banks decline to renew a $65M credit line. CIT provides up to $50M.161729

  27. Oct1991
    Stores

    Western stores close

    Lionel Playworld begins closing its four Utah stores and its other stores in the West.18

  28. May 71992
    Rivals

    Child World files

    The second largest toy retailer files for Chapter 11 and says it will close 54 of 125 stores.19

  29. Jun 111992
    Rivals

    Merger talks with Child World

    Two bankrupt chains discuss combining into about 140 stores. Lionel has 71.20

  30. Aug1992
    Rivals

    Talks collapse

    Child World says it will cease operations and close its 71 remaining stores.21

  31. Oct 131992
    Money

    More borrowing for Christmas

    The bankruptcy court lets Lionel borrow more under its $55M credit facility. It operates 69 stores.22

  32. Jan 111993
    Stores

    27 more closings

    After a poor Christmas, Lionel says it will close 27 more stores and two distribution centers, leaving 29 stores in six markets.23

  33. May 251993
    Bankruptcy & end

    Creditors vote to liquidate

    The creditors’ committee votes to liquidate Lionel Leisure.27

  34. Jun 21993
    Bankruptcy & end

    Liquidation announced

    Lionel says it will go out of business and close its 28 remaining stores.242526

Part 2 of 6

Business

The numbers · Marketing · Rivals

The money

Two bankruptcies in the numbers that survive

Lionel was a public company, but its filings predate EDGAR and are not online. What follows is every figure we could confirm from court opinions and the press of the time. The gaps in the charts are gaps in the record, not zeros.

Stores: built, halved, rebuilt, liquidated

Lionel’s toy stores under all names, at the dates a source gives a count.

050100150Early ’82Mar ’83Sep ’83Nov ’88Jun ’91Jun ’92Oct ’92Feb ’93Jun ’93123456050100150Early ’82Sep ’83Jun ’91Oct ’92Jun ’93123456
  1. Early ’82 · the first peak 105 stores, after buying 26 in Texas and the Midwest in 1980. Chapter 11 follows on February 19, 1982.124
  2. Mar ’83 · cut by half 56 stores a year into the first bankruptcy.4
  3. Nov ’88 · the comeback 90 stores in 16 states and a new store in Manhattan.10
  4. Jun ’91 · the second filing 97 stores on June 14, 1991. The company had 101 before it began closing them.1620
  5. Feb ’93 · the retreat 29 stores in six markets after the Christmas of 1992.23
  6. Jun ’93 · the vote 28 stores when the creditors’ committee votes to liquidate.2427
Data table
Stores: built, halved, rebuilt, liquidated
Date of the report (not evenly spaced)Stores
Early ’82105
Mar ’8356
Sep ’8359
Nov ’8890
Jun ’9197
Jun ’9271
Oct ’9269
Feb ’9329
Jun ’9328
Counts as reported: 105 and 564, 598, 9010, 971617, 7120, 6922, 2923, 282425. A 1982 Times article gives “more than 90 stores in 22 states” for the same period as the 105 figure1; a 2017 retrospective gives “more than 150”, which no contemporary source we found supports.28

Sales, in the years a figure survives

Lionel Corporation revenue, $ millions. Only six years are documented in our sources.

Data table
Sales, in the years a figure survives
PeriodRevenue ($M)
1981$295.1M
1982$338.6M
1987$343.6M
FY to Jan ’90$429M
FY to Jan ’91$426M
FY to Jan ’93$291.5M
1981 and 1982: Second Circuit opinion2. 198710. Fiscal years ended January 1990 and January 31, 199116. Fiscal year ended January 30, 19932627. The 1981–82 figures are consolidated and include Dale Electronics. Years not shown are not in our sources.

Profit and loss, where reported

$ millions. Four results over eleven years, and the basis differs between them.

Data table
Profit and loss, where reported
PeriodProfit or loss ($M)
1982$-51M
1987$5.8M
FY to Jan ’90$0.3M
FY to Jan ’91$-5.9M
FY to Jan ’93$-100.3M
1982: “some $51 million” lost4. 1987: earned $5.8M10. Year to January 1990: an operating profit of $300,000, not a net figure; year to January 31, 1991: a loss of $5.9M16. Year to January 30, 1993: a loss of $100.3M2627. The 1982 bankruptcy petition separately gave a $5.5M loss for 1981.1

Where the 101 stores of 1991 went

Store closings between the second bankruptcy and the liquidation vote.

101 Stores before the 1991 closings
30 30%Closed during 199143 43%Closed 1992 to May 1993 (derived remainder)28 28%Still open at the liquidation vote30 30%Closed during 199143 43%Closed 1992 to May 1993 (derivedremainder)28 28%Still open at the liquidation vote
  • Closed during 1991. Including the western stores1820
  • Closed 1992 to May 1993 (derived remainder). 101 − 30 − 28
  • Still open at the liquidation vote. In seven states24
Data table
Where the 101 stores of 1991 went
Where it wentAmountShareNote
Closed during 19913030%Including the western stores
Closed 1992 to May 1993 (derived remainder)4343%101 − 30 − 28
Still open at the liquidation vote2828%In seven states
101 stores and 30 closings in 199120; 28 stores at liquidation2425. The middle figure is derived. Sources differ by a store or two from month to month, and at least one store opened in this period, so treat the split as approximate.

Who was owed money in 1982

$91M
owed to toy manufacturers at the first filing1
$135.6M
in pre-petition claims, $80M of it held by the 13 members of the creditors’ committee2
$5.5M
owed to Atari, the largest trade creditor named in the petition1
$22.5M
lost in toy retailing over the two years ending December 1982, by the appeals court’s count2
The New York Times1 and Committee of Equity Security Holders v. Lionel Corp.2. The court’s $22.5M and the Times’s “some $51 million” for 1982 alone4 are not reconciled in our sources; they may be measured on different bases.
The second bankruptcy, 1991 to 1993
$65Mworking-capital line the banks declined to renew in 199116
$55Mdebtor-in-possession credit from CIT, running through June 19932022
$32.5Mnet loss in the first nine months of fiscal 1992, on sales of $152.1M23
34¢lost per dollar of sales in the final fiscal year (derived: $100.3M ÷ $291.5M)26
UPI reported that Lionel listed $351.5M of assets and $255M of liabilities, including $55.7M of publicly held debt, when it filed in 1991.24 We have not seen the petition itself.

The brand

A kangaroo, a jingle and a lot of local television

What people remember about Kiddie City is not the balance sheet. It is the kangaroo, the orange sign and a jingle. We have no figure for what Lionel spent on advertising, and we do not guess.

Original illustration, not the trademarked character.

The kangaroo

The Times called the kangaroo “Kiddie City’s symbol” in 1988, when a Lego kangaroo taller than the chief operating officer stood at the door of the Manhattan store.10 A 2017 retrospective names the mascots as Kaycee and Baby.28

The slogans

The same retrospective records two catch phrases: “Toy Capital of the World” and “Turn that Frown Upside Down.”28 The second gives its title to a surviving 1983 Playworld commercial.33

In New York the company also used celebrity appearances, such as the Jets running back Freeman McNeil, and counted on about 600,000 people passing the 34th Street store each day.10

Commercial · 1984Kiddie City commercial, November 1984 The Lionel Kiddie City logo on an orange card with a drawn kangaroo. The date is the uploader’s. We took the page’s colours from this spot.34 Watch on YouTube
What the 1988 Manhattan store tells us about the format
14,000different toys stocked in one store10
60%of the chain’s toys were sold in November and December10
15–50%below the suggested retail prices charged at F.A.O. Schwarz or Macy’s10
$3,999.99for a gas-powered Bugatti toy car, the most expensive item the reporter saw10
The New York Times, November 13, 1988.10

What sold

In 1988 video games were “far and away the biggest category” in the store, and Lionel’s chief operating officer said about 90% of that business was Nintendo. Boys’ action figures were second and board games third.10 The reliance on one season was the weakness: both bankruptcies followed a poor Christmas.11623

The rivals

Three toy supermarket chains, and the discounters behind them

Toy supermarkets were a three-chain business for two decades. Lionel and Child World chased Toys “R” Us, tried to merge with each other twice, and closed within a year of each other.

Who won, who died

The toy supermarket chains of the 1980s and what became of them.

Lionel (Kiddie City, Playworld)

Dead
1982: 1051993
97 stores (Jun 1991) Chapter 11 in 1982 and 1991. Liquidated from June 1993.1624

Child World / Children’s Palace

Dead
125 stores (May 1992) The No. 2 chain. Filed for Chapter 11 on May 7, 1992 and ceased operations that summer after merger talks with Lionel failed.1921

Toys “R” Us

Won, then liquidated in 2018
358 stores (1988) The leader throughout. It outlived both rivals by 25 years, then closed its U.S. stores in 2018 under nearly $8 billion of debt.1032

Kmart, Wal-Mart, Target

The discounters
No count in our sources By 1993 the trade press said the spoils of the toy superstore contraction went to discounters with expanded toy departments.23
Data table
Who won, who died
CompanyOutcomeStoresNotesSeries
Lionel (Kiddie City, Playworld)Dead97 stores (Jun 1991)Chapter 11 in 1982 and 1991. Liquidated from June 1993.105, 56, 59, 90, 97, 71, 69, 29, 28, 0
Child World / Children’s PalaceDead125 stores (May 1992)The No. 2 chain. Filed for Chapter 11 on May 7, 1992 and ceased operations that summer after merger talks with Lionel failed.
Toys “R” UsWon, then liquidated in 2018358 stores (1988)The leader throughout. It outlived both rivals by 25 years, then closed its U.S. stores in 2018 under nearly $8 billion of debt.
Kmart, Wal-Mart, TargetThe discountersNo count in our sourcesBy 1993 the trade press said the spoils of the toy superstore contraction went to discounters with expanded toy departments.
Store counts as cited. No single source gives all chains at one date, so the dates differ.

Share of the U.S. toy market, 1982

Share of a toy market of about $9 billion, as given by analysts when Lionel first filed.

Toys “R” Us
9.5%
Child World
about 3%
Lionel
about 3%
Data table
Share of the U.S. toy market, 1982
RetailerShareNote
Toys “R” Us9.5%
Child Worldabout 3%
Lionelabout 3%
The New York Times, February 25, 1982. The rest of the market was held by general merchandise stores.1

One Lionel store for every four Toys “R” Us stores

358Toys “R” Us stores in November 198810
=
4 ×Lionel stores at the same date (90; each icon is the whole Lionel chain (90 stores))

Derived 358 ÷ 90 ≈ 4.0. Both counts are from the same New York Times article.10

Data table
One Lionel store for every four Toys “R” Us stores
Value
Toys “R” Us stores in November 1988358
Lionel stores at the same date90
Ratio4 (derived)

Sales per store, early 1990s

Annual sales per store, $ millions. A bigger chain bought better and sold more from each box.

Toys “R” Us, average (analyst estimate)
about $9M
“Roughly twice” Child World’s19
Child World, average (analyst estimate)
$4.5M
199219
Lionel, average (derived)
$4.4M
$426M ÷ 97 stores16
Kiddie City, Langhorne and Springfield, Pa.
$3.6M
Each, 199326
Kiddie City, Whitehall, Pa.
$1.8M
199326
Data table
Sales per store, early 1990s
Store or chainAnnual sales per storeNote
Toys “R” Us, average (analyst estimate)about $9M“Roughly twice” Child World’s
Child World, average (analyst estimate)$4.5M1992
Lionel, average (derived)$4.4M$426M ÷ 97 stores
Kiddie City, Langhorne and Springfield, Pa.$3.6MEach, 1993
Kiddie City, Whitehall, Pa.$1.8M1993
Child World and Toys “R” Us: estimate by analyst Sean McGowan, quoted in the Times in May 1992.19 Lionel: derived from revenue for the year to January 31, 1991 and the store count of June 199116, so it is approximate. Individual stores: American Business Information figures quoted by The Morning Call.26
Kiddie City, Playworld, Toy Warehouse

Lionel

Stores, late 1988
90 in 16 states10
Growth method
Bought chains in 1980; analysts called it ill-timed1
Inventory
Could not afford a full range year-round1
Bank credit
Withdrawn in 1981 and 1991116
End
Liquidated 199324
The category leader

Toys “R” Us

Stores, late 1988
35810
Growth method
Opened its own stores1
Inventory
About $100M, much of it financed by vendors (1983)8
Bank credit
Not at issue in our sources
End
U.S. stores closed 201832
The New York Times, 1982–1991181016, UPI24 and The Baltimore Sun32.

They have paid a lot of attention to real estate and location and it has paid off.

Michael J. Vastola, Lionel chairman, on Toys “R” Us, The New York Times, Sep 4, 19838

Rankings moved around. The Times called Lionel the fourth largest toy chain in 1988 and the third largest chain of toy supermarkets in 1991.1016 The Morning Call in 1993 said it had been the second largest toy retailer.26 We report each claim with its source and do not pick one.

Part 3 of 6

Brand

Commercials & footage · Brand gallery

Commercials & footage

Turn that frown upside down

The chain advertised heavily on local television, especially before Christmas. These are collectors’ uploads of spots taped off the air. Where the year comes only from the uploader, the caption says so.

Commercial · 1983Lionel Playworld: “Turn that frown upside down” A Playworld spot built around the chain’s jingle. The uploader says it aired before November 28, 1983 on WWL, the CBS station in New Orleans. Lionel was in Chapter 11 at the time.332 Watch on YouTube
Commercial · 1978Lionel Playworld holiday commercial A Christmas spot from the years when Lionel was still adding stores. The 1978 date is the uploader’s and we could not confirm it. Watch on YouTube
Commercial · 1984Kiddie City commercial, November 1984 The Lionel Kiddie City logo on an orange card with a drawn kangaroo. The date is the uploader’s. We took the page’s colours from this spot.34 Watch on YouTube
Commercial · 1987Lionel Playworld commercial A VHS transfer dated 1987 by the uploader. That year Lionel earned $5.8M, its best documented result.10 Watch on YouTube
Commercial · 1988Lionel Kiddie City Christmas ad A cartoon kangaroo in the aisles of a store, dated 1988 by the uploader. This was the Christmas of the new Manhattan store.10 Watch on YouTube
Retrospective · 2015“Lionel Kiddie City Toy Store Memories” A six-minute podcast segment by two collectors who shopped there as children, published in November 2015. It is recollection, not a source for any figure on this page. Watch on YouTube

Videos are embedded from the services that host them and load only when you press play. YouTube embeds use youtube-nocookie.com. Each video belongs to its uploader or rights holder and is shown here for commentary; we do not host any of the files. We found no surviving local-news footage of the 1993 liquidation that could be embedded.

Part 4 of 6

People

People · Press

The people

Who ran it, and who tried to buy it

Ages and titles are as given in the press at the time. Later careers are left out where we have no source.

People (8)
Name and roleWhat they didAfterwards
Michael J. VastolaChairman and CEO, 1983 – 1993

Joined Lionel in 1971 as a junior accountant and was vice president of finance when it filed in 1982. Named chairman and chief executive in March 1983, aged 37, and led the company out of Chapter 11, through the takeover fight and into the second filing.41623

Leonard WassermanChairman and CEO, Lionel Leisure

Lionel’s senior vice president for retail. He served as acting president and chief executive of the parent from July 1982 to March 1983, then returned to running the stores subsidiary.34

Ronald SaypolPresident and CEO until Jul 1982

Resigned at 52, with chief operating officer Richard R. Schilling Jr., under pressure from creditors five months into the first bankruptcy.3

Marvin KatzChief operating officer, 1988

Walked a Times reporter through the new Manhattan store and its 28 registers. Asked by a shopper how many Lazer Tag sets he had, he answered: “I have 98,000.”10

Neil B. FriedmanCOO of Lionel Leisure from Jun 1991

A former Hasbro marketing executive, named a director and chief operating officer of the stores subsidiary on the day of the second filing, at 43.1617

George A. PadgettSenior vice president and general counsel

The company’s spokesman through the takeover fight and the second bankruptcy. In June 1992 he said the remaining stores were profitable.1220

Robert I. ToussieBidder, 1989

A New York real estate developer, 48 at the time, whose partnership held 9.9% of Lionel and offered $8.25 a share. He dropped the bid in January 1990 after a $500,000 settlement.111214

Richard P. KughnOwner of Lionel Trains Inc.

A Detroit real estate developer and train collector who bought the train business in 1986. His company bought the Lionel trademarks from the retailer in 1990.916

Told the Los Angeles Times in 1990 that train sales had tripled in four years to $60M.31

The clippings

What they said at the time

Press (10)
Kiddie City is an experience like the Taj Mahal by moonlight. It’s a Grand Canyon of toys.
Jim Myers, Democrat and Chronicle, December 1979, as quoted in the paper’s 2017 retrospective28
We’re viewing this as a situation to revive the company.
Michael J. Vastola, on the second Chapter 11 filing, The New York Times, Jun 15, 199116

  1. Walter Peterson, analyst, Fahnestock & Company, The New York Times, Feb 25, 19821

    There is nothing wrong with specialty toy retailing.

  2. Michael Vastola, asked why Kiddie City had not been in New York before, The New York Times, Nov 13, 198810

    Stupidity.

  3. Robert I. Toussie L.P., Nov 198913

    We continue to have a desire to acquire Lionel but are deeply troubled by the decline in the operating performance of the business.

  4. David Liebowitz, analyst, American Securities, UPI, Jun 14, 199117

    What you have here is purely a toy reseller who, unfortunately, could not compete against Toys ‘R’ Us.

  5. Gary Jacobson, analyst, Kidder, Peabody, on Lionel and Child World, The New York Times, Jun 12, 199220

    Toy manufacturers have been extremely patient with the two companies, and they’ve just about run out of patience.

  6. Nadene Dahlstrom, shopper at a Utah closing sale, Deseret News, Oct 22, 199118

    There were a few good sales, but Lionel is generally more expensive than Walmart or other stores.

  7. Sally Smith, analyst, Alex. Brown & Sons, on the January 1993 closings, Discount Store News23

    Certainly not encouraging.

  8. Tim Gnap, store manager, Bel Air, Md., The Baltimore Sun, Jun 6, 199327

    Everyone was hoping we would weather the storm.

Part 5 of 6

Verdict

Cause of death · What if · Afterlife

Cause of death

The autopsy

Tap a cause to see the evidence. The percentages are our editorial weighting. The evidence under each one is sourced.

Cause of death, by editorial weight

One square is one percentage point. The weights are our judgment, not a measurement.

  1. 35%A bigger rival, then the discounters
  2. 25%Thin capital and nervous lenders
  3. 20%Growth by acquisition and overreach
  4. 10%A takeover fight and distracted management
  5. 10%Recession and a one-season business
Data table
Cause of death, by editorial weight
CauseWeight
A bigger rival, then the discounters35%
Thin capital and nervous lenders25%
Growth by acquisition and overreach20%
A takeover fight and distracted management10%
Recession and a one-season business10%

The Times opened its 1991 bankruptcy report with “more than a decade of unsuccessfully competing with Toys ‘R’ Us.” Toys “R” Us had four times as many stores in 1988 and, by an analyst’s estimate, about twice the sales per store of Child World, whose average was close to Lionel’s (derived). By 1993 Kmart, Wal-Mart and Target were taking toy sales as well.10161923

In 1982 an analyst said lack of capital kept Lionel from carrying a full inventory year-round. Banks refused further support after December 1981 and declined to renew a $65M line in 1991. In December 1992 the company stopped paying suppliers and landlords.11623

Lionel bought 26 stores in 1980 for $12.25M (derived) just before a recession and closed 49 stores (derived) within 13 months of filing. After 1985 it expanded again, to about 100 stores, and closed 30 during 1991.142026

A bid valued at $8.25 a share was resisted through 1989, shareholders questioned a stock sale to investors tied to management in 1990, and a dissident investor attacked the board in 1991. The 1991 Times report said the attacks “exacerbated” the company’s troubles.121516

The chain sold 60% of its toys in November and December. Poor Christmas seasons in 1981, 1990 and 1992 each preceded a filing or a round of closings.1101623

Editorial judgment: the weights are an interpretive model by the Spectre Brands editors, not a measured quantity. The press of the time documents the symptoms. How much each one contributed is a matter of opinion.

The fork in the road

What if…

Four decisions where the story could have gone differently. The “What if” panels are speculation, labeled as such.

What happened

In 1980 Lionel bought Fun City Toys (nine stores in Texas, $4.5M) and Consolidated Toy (17 stores in the Middle West, $7.75M). An analyst said the purchases came just before the economy declined and that some locations were poor.1 Within three years the chain had shrunk from 105 stores to 56.4

What if speculative

Opening its own stores in markets it already supplied, as Toys “R” Us did, would have been slower and would have kept $12.25M (derived) and the banks’ patience for the Christmas of 1981. It would not have closed the gap in scale.

What happened

Lionel resisted Robert Toussie’s 1989 offer of $8.25 a share and paid $500,000 to end the fight in January 1990.1214 Vastola later called the bid unfinanced.16 Seventeen months after the settlement the shares were at 15/16 of a dollar and the company was in Chapter 11.16

What if speculative

If the bid could have been financed, shareholders would have received roughly nine times what the stock was worth in June 1991 (derived: $8.25 ÷ $0.9375 ≈ 8.8). Whether new owners, who included a former Toys “R” Us executive30, would have run the stores better is unknowable.

What happened

Lionel and Child World almost merged in 1987. The deal fell apart when the stock market crashed.20 They tried again in June 1992, when both were in Chapter 11, and failed within two months.2021

What if speculative

A combined No. 2 with more than 200 stores might have bought on better terms. It would also have carried both companies’ debts and overlapping stores into the 1990–91 recession, and the 1992 attempt suggests toy makers had limited patience for either.

What happened

Lionel kept 97 stores in 15 states when it filed in 1991 and retreated to 29 stores in six mid-Atlantic, Ohio and Florida markets only in January 1993, after it had stopped paying suppliers.1723

What if speculative

Retreating to the Philadelphia, New Jersey and Baltimore–Washington core in 1991, while it still had $50M of fresh credit16, might have left a regional chain. The fate of other regional toy chains suggests it would have bought time, not safety.

Where are they now

The afterlife

Kiddie City

  1. The Lionel name

    Sold

    Lionel Corporation sold the Lionel trademarks to Lionel Trains Inc., the train maker owned by Richard Kughn, for $10M in 1990.16 The train business was doing well without the toy stores: Kughn told the Los Angeles Times that sales had tripled in four years to $60M.31

  2. The Kiddie City name

    Unclaimed

    We found no retailer that has traded as Kiddie City since 1993, and no record of who bought the name in the liquidation, if anyone did. The ownership of the trademark today is unknown to us.

  3. The company

    Buried

    Lionel said it would negotiate “an orderly liquidation” with its creditors’ committee.2426 What creditors and shareholders finally received is not in our sources. Litigation from the estate was still in the appeals court in 1994.29

  4. The employees

    Dispersed

    Lionel had 2,500 workers a year before the end.26 The Bel Air, Maryland store alone had 25, and its manager had been with Lionel Leisure for 15 years.27

  5. The buildings

    Re-let

    The stores were ordinary big boxes and were easy to re-let. The Kiddie City in Greece, New York became a Home Depot.28 In Bel Air, an employee leaving her shift said she had heard Toys “R” Us was looking for a site nearby.27 We have no complete list of what replaced the stores.

  6. The court case

    Cited

    The 1983 appeal over the Dale Electronics sale, In re Lionel Corp., set the “sound business reason” test for selling a bankrupt company’s assets outside a plan. Restructuring lawyers still cite it.235

  7. The rival

    Outlasted

    Toys “R” Us, which Lionel could not catch, announced the closing of its U.S. stores in March 2018.32

Who owned the name

The stores and the Lionel name parted company in 1990. Only one of them is still in use.

  1. 1957

    Kiddie City

    Founded in Philadelphia as a toy supermarket.24

  2. By 1969–70

    Lionel Corporation

    Lionel sells its train-making rights in 1969 and concentrates on toy stores. The date and price of its purchase of Kiddie City are not in our sources.19

  3. Feb 1982

    Lionel Corporation, in Chapter 11

    First bankruptcy. The chain is cut from 105 stores to 56.24

  4. 1985

    Lionel Corporation, reorganized

    Emerges and expands again under Michael Vastola.1627

  5. 1990

    Lionel Trains Inc.

    Buys the Lionel trademarks. The stores keep trading as Lionel Kiddie City.16

    $10M
  6. Jun 1991

    Lionel Corporation, in Chapter 11

    Second bankruptcy, with 97 stores.16

  7. Jun 1993

    Creditors

    The creditors’ committee votes to liquidate. The last 28 stores close.2427

  8. Today

    No known operator

    No store trades as Kiddie City. Who holds the name is unknown to us.

Data table
Who owned the name
WhenOwnerWhat happenedPrice
1957Kiddie CityFounded in Philadelphia as a toy supermarket.
By 1969–70Lionel CorporationLionel sells its train-making rights in 1969 and concentrates on toy stores. The date and price of its purchase of Kiddie City are not in our sources.
Feb 1982Lionel Corporation, in Chapter 11First bankruptcy. The chain is cut from 105 stores to 56.
1985Lionel Corporation, reorganizedEmerges and expands again under Michael Vastola.
1990Lionel Trains Inc.Buys the Lionel trademarks. The stores keep trading as Lionel Kiddie City.$10M
Jun 1991Lionel Corporation, in Chapter 11Second bankruptcy, with 97 stores.
Jun 1993CreditorsThe creditors’ committee votes to liquidate. The last 28 stores close.
TodayNo known operatorNo store trades as Kiddie City. Who holds the name is unknown to us.
UPI24, The New York Times14916, the Second Circuit2 and The Baltimore Sun27.

Sources & data notes

Show your work

Lionel’s SEC filings predate EDGAR and are not online, so the primary sources here are two federal appeals court opinions. Everything else is contemporary press, read in full. New York Times archive links may need a subscription; we read those articles through Internet Archive copies of the same pages.

  1. Lydia Chavez, “Ill-Timed Acquisitions Helped Force Lionel Into Chapter 11”, The New York Times, Feb 25, 1982.
  2. U.S. Court of Appeals, Second Circuit, Committee of Equity Security Holders v. Lionel Corp., 722 F.2d 1063, decided Nov 29, 1983.
  3. “2 Lionel Chiefs Are Replaced”, The New York Times, Jul 12, 1982.
  4. “Lionel Officer Promoted To Chairman and Chief”, The New York Times, Mar 17, 1983.
  5. “Unsecured Credit Pact With Lionel”, The New York Times, Mar 23, 1983.
  6. “A Creditor Plan Filed by Lionel”, The New York Times, Jun 21, 1983.
  7. “Lionel Corp. to Sell 82% Stake in Dale”, The New York Times, Sep 27, 1983.
  8. “The New Game at Toys ‘R’ Us”, The New York Times, Sep 4, 1983.
  9. Kenneth N. Gilpin and Calvin Sims, “A Toy Train Collector Finds a Niche at Lionel”, The New York Times, Apr 17, 1986.
  10. “Kiddie City Tests Discount Toys in Manhattan”, The New York Times, Nov 13, 1988.
  11. Reuters, “Toussie Seeks To Acquire Lionel”, The New York Times, Feb 14, 1989.
  12. “Lionel Receives Takeover Offer”, The New York Times, Sep 12, 1989.
  13. Reuters, “Toussie to Review Offer to Buy Lionel”, The New York Times, Nov 23, 1989.
  14. “Briefs”, The New York Times, Jan 23, 1990 (Lionel’s settlement with Toussie).
  15. “Lionel Is Urged To Sell Big Stake”, The New York Times, Apr 6, 1990, with correction of Apr 7.
  16. Anthony Ramirez, “Lionel Seeks Chapter 11 Protection”, The New York Times, Jun 15, 1991.
  17. Jack Lesar, “Lionel, one-time trainmaker, files for bankruptcy”, UPI, Jun 14, 1991.
  18. Angelyn Nelson Hutchinson, “Lionel Playworld Begins Shutting Its Doors in Utah”, Deseret News, Oct 22, 1991.
  19. Adam Bryant, “Child World Files for Bankruptcy”, The New York Times, May 8, 1992.
  20. Adam Bryant, “Child World And Lionel in Merger Talks”, The New York Times, Jun 12, 1992.
  21. “Child World Will Close as Talks With Lionel Fail”, The New York Times, Aug 5, 1992.
  22. “Court Allows Lionel to Increase Borrowing”, The New York Times, Oct 14, 1992.
  23. “Lionel closing 27 stores in struggle for survival”, Discount Store News, Feb 1, 1993 (Internet Archive copy of FindArticles).
  24. “Lionel, the toy merchant, going out of business”, UPI, Jun 2, 1993.
  25. The Associated Press, “Lionel Will Liquidate, Closing Kiddie City Toy Chain”, The New York Times, Jun 3, 1993.
  26. “Kiddie City Is Going Bye-Bye”, The Morning Call (Allentown, Pa.), Jun 3, 1993.
  27. Frank Lynch, “25 to lose jobs in Bel Air when Kiddie City closes”, The Baltimore Sun, Jun 6, 1993.
  28. Alan Morrell, “Whatever Happened to ... Kiddie City toy stores?”, Rochester Democrat and Chronicle, Dec 2, 2017. A retrospective.
  29. U.S. Court of Appeals, Second Circuit, In re Lionel Corp. (Klein v. Civale & Trovato, Inc.), 29 F.3d 88, 1994.
  30. “Market Place: Another Offer for Child World”, The New York Times, Feb 21, 1991.
  31. Donald Woutat, “Getting on the Right Track: After Years of Decline, Lionel Train Is Making a Comeback”, Los Angeles Times, Dec 25, 1990.
  32. “Toys ‘R’ Us to close all 800 of its U.S. stores”, The Baltimore Sun, Mar 14, 2018.
  33. “1983 Lionel Playworld ‘Turn that frown upsidedown’ TV Commercial”, YouTube, uploaded by ewjxn on Sep 5, 2019, with the uploader’s note on when and where it aired.
  34. “Kiddie City - November 1984 Commercial”, YouTube, uploaded by 80s Flashback on Oct 16, 2020.
  35. Weil, Gotshal & Manges, Restructuring blog, “A Lionel of Bankruptcy Jurisprudence”, on the continuing importance of the 1983 decision.
Data notes (8)

Data notes

Derived: $12.25M for 26 stores is $4.5M + $7.75M and 9 + 17 stores.1 49 stores closed is 105 − 56.4 Lionel’s sales per store of about $4.4M is $426M ÷ 97, mixing revenue for the year to January 1991 with a June 1991 store count.16 The 34 cents lost per dollar is $100.3M ÷ $291.5M.26 The 43 stores in the flow diagram is 101 − 30 − 28.2024 358 ÷ 90 ≈ 4.0.10 $8.25 ÷ $0.9375 ≈ 8.8.1216

Estimates: Sales per store for Toys “R” Us and Child World are an analyst’s estimates quoted by the Times in 1992.19 Single-store sales in Pennsylvania are figures from American Business Information quoted by The Morning Call.26

Conflicts between sources: The store count before the first bankruptcy is “more than 90” in one Times article and 105 in another; a 2017 retrospective says “more than 150”, which we treat as unverified.1428 The chain is called the second, third and fourth largest by different sources.101626 The appeals court counted $22.5M of retailing losses over 1981–82, the Times “some $51 million” for 1982 alone.24 Sources give 28 or 29 stores, and six or seven states, for the last months.232425 The Times says the Toussie bid was dropped at $95.4M; the September 1989 offer was valued at about $110M.1215

Unknown: When and for how much Lionel bought Kiddie City. Store counts and sales for 1957–1980 and 1984–1986. Advertising spending. How the 1985 reorganization was finally funded after the Dale Electronics ruling. The date the last store closed. What creditors and shareholders recovered. Who, if anyone, owns the Kiddie City name today.

Secondary and retrospective: The mascot names, the slogans and the fate of the Greece, N.Y. store come from a 2017 newspaper retrospective written by a former employee.28 Airing dates of commercials are the uploaders’ unless stated.

How we read the sources: New York Times articles were read in Internet Archive copies of the nytimes.com pages. The two UPI articles were read through a text-extraction tool that returned the sentences containing figures and quotations; we could not open the raw pages directly, so the UPI figures (97 stores in 15 states; $351.5M of assets, $255M of liabilities and $55.7M of public debt; 36 closings from January 1993; founding in 1957) should be checked against the linked pages before being reused.

Images: We found no freely licensed photograph of a Kiddie City or Playworld store on Wikimedia Commons, and the chain closed before it could have had a website. The page therefore uses original drawings and embedded commercials only. The accent red and the orange in the drawings were matched by eye to the 1984 commercial.34

General knowledge: That Toys “R” Us, Kmart, Wal-Mart and Target sold toys nationally in this period.

More post-mortems

Toys “R” Us

1957 – 2018

Ghost
Debt and buyouts
$457M interest in its last full year, on $460M of operating earnings

KB Toys

1922 – 2009

Ghost
Outcompeted
1,322 stores in January 1999. None ten years later.

FAO Schwarz

1862 – 2015

Ghost
Strategy and management
$104.9M lost by parent FAO Inc. in fiscal 2002, on sales of $460.4M

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